YEAR IN REVIEW: Renegotiated, renamed trade agreement highlights year

WASHINGTON — Tariffs and trade dominated the political news in 2018, especially for tires and the automotive aftermarket.

The year ended with two major trade developments — the revamped North American Free Trade Agreement (NAFTA) and the promise of renewed trade talks between the U.S. and China.

On Nov. 30, U.S. President Donald Trump, Canadian Prime Minister Justin Trudeau and outgoing Mexican President Enrique Pena Nieto signed the United States-Mexico-Canada Agreement (USMCA), the NAFTA successor pact.

One day later, the White House announced that Mr. Trump and Chinese President Xi Jinping had agreed to suspend all new tariffs on goods traded between the countries for 90 days pending the results of new trade talks.

The U.S. agreed to postpone raising tariffs on some $200 billion worth of Chinese goods, including tires, rubber and rubber chemicals, to 25 percent from 10 percent. In return, China reportedly agreed to buy unspecified amounts of U.S. goods in the energy, agricultural, industrial and other sectors.

Though Mr. Trump touted the USMCA as the biggest trade deal in history, some of the exact details of the agreement were unclear at the time of signing, and some opponents of the president expressed doubt as to whether the USMCA would protect domestic jobs, labor rights and the environment as much as he said it would.

The legislatures of the three nations must ratify the agreement before it can take effect.

The U.S. Tire Manufacturers Association (USTMA) said the USMCA "reconfirms the importance of free and fair trade among the three countries."

However, the United Steelworkers (USW) union, which also organizes tire workers, said the new agreement "is only another step in the process to reform NAFTA."

According to fact sheets from the Office of the U.S. Trade Representative, the USMCA will require that 75 percent of a vehicle be manufactured in USMCA-member countries to receive duty-free status, up from the 62.5 percent required by NAFTA.

It also requires that 40 to 45 percent of a vehicle must be assembled by workers making $16 or more per hour.

Even more controversial within many U.S. industries, including tires and the auto aftermarket, were the steep tariffs instituted by the Trump administration throughout 2018.

In March, citing threats to national security under Section 232 of the Trade Expansion Act of 1982, the Trump administration announced tariffs of 25 percent against imported steel and 10 percent against imported aluminum.

The domestic steel industry and the USW were enthusiastic at news of the tariffs. However, organizations such as the USTMA and the Association of International Automobile Dealers condemned the tariffs as harmful to their industries.

USTMA members faced special problems from the steel tariffs. The grade of steel needed for making reinforcing steel cord is not manufactured in the U.S., and the USTMA argued that tariffs on such imports would only serve to punish domestic tire manufacturers.

The U.S. Department of Commerce later established procedures for U.S. companies to apply for exemptions from the tariffs, and in May the administration granted permanent exemptions from the tariffs for steel and aluminum imports from several countries.

These countries included Brazil, which accounts for 56 percent of the tire-grade steel imported to the U.S., and South Korea, which accounts for 8 percent.

However, the existence of the steel and aluminum tariffs still caused concern among U.S. auto makers, which were disappointed when the USMCA did not exempt Canada and Mexico from them.

The announcement of the new U.S.-China trade talks, including the tariff suspension, briefly excited financial markets, but their enthusiasm faded when details of the deal weren't forthcoming. The Dow Jones Industrial Average was down nearly 800 points, or by more than 3 percent, on Dec. 4, three days after the agreement was announced.

With Washington concentrating on trade and elections, legislation was a relatively small part of the federal government year. The AV START Act (S. 1885), which would have created a framework for regulating autonomous vehicles on public roadways, languished in the Senate in 2018 despite a similar bill, H.R. 3388, having passed the House of Representatives by voice vote in 2017.

"The AV START Act … would protect against an unworkable patchwork of state and federal laws and regulations that could stifle innovation, job growth and the development of safety technologies," the Alliance of Automobile Manufacturers said in September.

Some congressional Democrats, however, said the AV START Act gave the auto industry too much leeway to ignore basic safety standards in the face of unproven technology.

Among tire-related state legislation, the most notable was passage of Ohio Senate Bill 223, which sets penalties of $1,000 per violation for installing bald, damaged or otherwise unsafe used tires on vehicles.

With this action, Ohio became the third state to enact USTMA-backed used tire legislation, after Colorado and New Jersey. Arizona has its own used tire law not devised by the USTMA.

The Texas legislature passed the USTMA bill, but Gov. Greg Abbott vetoed it, and a bill passed by the Indiana state legislature failed in that state's senate.

Antidumping and countervailing duties, as always, figured prominently in 2018.

On Nov. 1, the U.S. Court of International Trade (CIT) remanded to the International Trade Commission (ITC) its February 2017 determination that there was no material injury to the U.S. truck and bus tire industry because of Chinese imports.

The USW union, which had petitioned the ITC in 2016 for countervailing and antidumping duties on truck/bus tires from China, appealed the determination to the CIT. Interested parties had until Dec. 11 to comment on the matter.

In another, related matter, the U.S. Department of Commerce proposed antidumping duties of up to 231.7 percent and countervailing duties of 48.75 to 172.51 percent against Chinese on-the-road steel commercial vehicle wheels, rims and discs for tubeless tires with diameters of 22.5 to 24.5 inches.

The ITC scheduled a hearing on the issue for Jan. 8.

The tire retailing and retreading industries increased their lobbying of Capitol Hill in 2018, concerned over key issues such as import duties, health care, right-to-repair, infrastructure funding, scrap tires and the estate tax.

On June 20, the Tire Industry Association hosted TIA Federal Lobby Day, during which TIA members spoke to elected officials and their staff members about issues important to tire retailers and retreaders.

Eight of the attendees represented Retread Instead, an organization devoted to advancing the message that retreading is a reliable, economical and environmentally responsible technology.

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